Mexico's Retrogression: Implications of a Bankruptcy Reorganization Gone Wrong
An earlier essay (“Corporate Workouts in Mexico: The Good, the Bad, and the Ugly”) told of how Mexico had made considerable progress in the past decade-and-a-half in matters pertaining to corporate law, the strengthening of property rights, and the ease of doing business. It highlighted in particular the benefits of a new law governing the Mexican insolvency regime—the Ley de Concursos Mercantiles (LCM, best translated as the “Business Reorganization Act” of 2000, as amended in 2007).
It pointed out that the Mexican insolvency regime was being put to the test by the creditor-unfriendly precedent that Vitro S.A.B. was trying to set. Vitro, one of the world’s largest producers and distributors of glass products, is one of several major Mexican corporations that found themselves at the losing end of various currency derivative contracts in late 2008, when in the aftermath of the Lehman Brothers debacle, the Mexican peso unexpectedly took a big hit while the U.S. dollar rallied.